The difficulties of investing in social housing

Local councils have the ability to build housing and many have (re)started doing so in the last couple of years. The proposed Housing and Planning Bill will seriously affect their ambitions. The Bill contains a variety of measures that make a complex subject even more so – reducing both funding and certainty for local government.

At Mid Suffolk District Council, the council has over 3,300 homes in its own housing stock and runs a 30 year business plan to ensure there are the funds to maintain these and also to provide funds towards building new ones. Within the Housing and Planning Bill councils are forced to reduce rents by 1% per year. This will knock several million pounds off Mid Suffolk’s plans meaning less social housing will be able to be built.

Other measures in the Bill include greater promotion of Right to Buy yet local government only gets some of the discounted sale price of a council house and further can only use this to a maximum of 30% of the cost of building a replacement. The remainder of the sale price goes back to the Treasury and the council has to find additional funds in order to build the replacement. (And if the council does not spend the Right to Buy receipts within three years, these have to go back to the Treasury with interest.)

Housing Association homes will now be included in Right to Buy, albeit voluntarily, however much of the land Housing Associations built on was gifted by local councils so that more social housing could be built. The idea was that there would be social housing in perpetuity but now this will go into private hands and out of the public estate – further reducing the stock of social housing.

Government is asking councils to sell off their high value housing – funds which will be used to compensate Housing Associations for Right to Buy activity. However it doesn’t matter whether a council actually sells any housing or not (even if they have any high value housing which, outside of London, is not likely) as Government will simply charge a levy on councils payable to the Treasury. There is not yet any information on how this levy will be calculated.

And finally in the Housing and Planning Bill there is Pay to Stay. This is where households earning over £30,000 a year (outside London) pay more rent to stay in their council house. Again there is no detail on how this will work – especially given councils don’t actually collect data on household income.

Councils need the freedom to be able to build housing to meet their residents’ housing needs – whatever their circumstances – not a Bill that will mean they pay more to an increasingly centralising government that gives very little in return.